Erie Indemnity Company Class A (NASDAQ:ERIE) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.
Growth By State
Adam Klauber – William Blair: A couple of different questions. Clearly you’re continuing to show nice growth across product lines. From a geographic standpoint, particularly in the auto and homeowners, which states would you say are growing better than average and which states would you say are not growing as well?
Terrence W. Cavanaugh – President and CEO: As I mentioned in my prepared remarks, we’re growing our market share in all of our product lines, which would indicate in all territories. So we are having success across our footprint. I would not suggest that we are having a particularly difficult time in any of our states. I think, again, it’s a testimony to the things we’ve done over the past several years in terms of making sure we invest in our agency plan, giving them the tools necessary to be successful, both as individuals and as a brand in those states. So I guess I’m very pleased that across the board we’re having success. We are – I guess, we’ve looked at our footprint and looked at places where we had maybe less penetration and worked hard to build the brand there. Those will be places like Western Tennessee, bit of Eastern and Northeastern New York State; we continue investing in places like Wisconsin and Illinois, where we have less market penetration, but we’re a Company that’s very focused on that. We’re being successful.
Adam Klauber – William Blair: Then as far as the competitive environment, again sticking with the personal lines business, in the last 12 months or so from what we’ve seen lot of the competitors have been increasing or trying to get more rate, and again, it’s obviously state by state or geography business in auto and particularly homeowners. Have you seen any change in that competitive environment or are they still generally pushing for rate and trying to be more focused on profitability than market share growth at this point?
Terrence W. Cavanaugh – President and CEO: I would say the marketplace in the personal space is fairly disciplined, again, based upon the realities of the investment marketplace. I would suggest that the tools that the industry has been able to develop over, call it, the last decade in terms of being better able to predict perhaps lost costs in the future, there is I’d consider a slow but consistent march to make sure that the industry stays on top of the rate for both homeowners and automobile. Clearly, the homeowners business has been more problematic based upon the weather and concentration issues. But I also see some interest in making sure that the automobile business stays the same. I would suggest it doesn’t cost any less today to repair an automobile than it did a year ago. So you’ve got to make sure you don’t get lulled in complacency on the automobile line. I think the industry and we are paying attention to that.
Adam Klauber – William Blair: Then could you explain that North Carolina commission adjustment more? I didn’t catch exactly what that was.
Terrence W. Cavanaugh – President and CEO: That’s something that’s been – we discussed obviously last year when it happened, but I’ll let Marcia respond to that.
Marcia A. Dall – EVP and CFO: Last year in 2012 we had an adjustment in the second quarter for commissions that were reimbursed by North Carolina and that had not come through to Indemnity. So we got a benefit or reduction in our commission expense last year in second quarter. So what we’re trying to show or explain in our prepared remarks here is that if you exclude that, because that was a one-time amount, then you can see our commission expense is tracking more normally year-over-year to our growth in our direct written premium.